Only four regions see gloom lifting

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The Independent Online
MANUFACTURERS in north and north- west England, Wales and Northern Ireland expect orders and output to rise in the next four months, the Confederation of British Industry said yesterday.

The findings, which contrast with last month's prediction of a continued manufacturing recession in the country as a whole, came in the CBI's regional breakdown of the latest quarterly Regional Trends Survey, prepared with Business Strategies Ltd.

With the exception of the four regions all others, including the critical South-east, broadly believe orders and output will be flat or decline slightly in the months to come. The survey said the slight improvement in the divergent regions appeared to reflect greater optimism over export orders.

The most pessimistic expectations over future output were registered in East Anglia and Scotland, where the number of firms expecting output to fall exceeded those hoping for a rise by a negative balance of 11 per cent.

General business optimism over the next four months was highest in Northern Ireland - a very small economy dominated by a few large firms and a high proportion of companies that depend on public spending.

The most pessimistic region was the South- west, where demand has fallen sharply and the number of firms working below capacity is higher than in any other region, leading to widespread job losses.

Despite the divergent trends, the experience of the past four months suggests that optimism over exports and hence hopes for improved orders and output in some regions may be overdone.

The CBI said manufacturers in all regions experienced a slow fall in demand in the past four months. Expectations of an upturn last April were dashed by excessive optimism over export prospects and also by a sharp decline in orders for products used by other manufacturers, such as chemicals or metals.

In the South-east, which accounts for one- third of the national economy, orders continued to fall in the past four months. Moreover, financial pressures probably meant that firms in the region had to meet demand from the storeroom shelf rather than the production floor, and as a result the fall in output quickened.

Despite the general decline in demand over the past four months, East Anglia, the East Midlands and Northern Ireland did experience a small increase in production.

The report suggested that businesses that hoped to benefit from the illusory spring recovery were producers of intermediate goods.

These companies pinned their hopes on changes in the stock cycle, in which companies ran down stocks by less than before and some firms even increased them in anticipation of recovery. But these hopes were largely unfulfilled.

(Map omitted)

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